Construction mafias have put a serious dent in the real estate sector, driving up costs, delaying projects and putting investors off.

According to a Business Day report, Cliffe Dekker Hofmeyr (CDH) warns the lawlessness poses a risk to the industry.

CDH’s Lulama Lobola said the impact of these groups was profound and had a ‘chilling effect’ on investment in the real estate sector.

‘Local and international investors are wary of committing funds to projects that may be subject to extortion or disruption. This hesitation affects the availability of capital for new developments and can slow down the growth of the sector,’ said Lobola.

‘One of the most immediate impacts of the construction mafia is the delay of projects. Developers are forced to halt construction when sites are invaded or when contractors refuse to work under threat. These interruptions lead to significant cost overruns, as delays can result in penalties, increased labour costs and the need for heightened security measures.’

The latest FNB/BER civil confidence index shows that – while confidence among civil contractors has reached its best level in eight years – concern over construction mafias is growing. Lobola said that the government should consider policy reforms that made it easier for developers to comply with local participation requirements in a way that benefited the community and the projects.

‘Clearer guidelines on community involvement in construction projects can help prevent the manipulation of these processes by criminal groups,’ she said.

‘Only through a combination of law enforcement, community engagement and policy reform can the construction mafia be effectively countered, ensuring a safer and more prosperous future for SA’s real estate sector.’

Full Business Day report